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Clean energy investment seeking a cool trillion

By James Noble

January 23, 2014

New research finds that the clean energy industry will need to attract the staggering sum of $1 trillion per year by 2030 to keep global warming within the limit agreed on by international climate negotiators.

The so-called “clean trillion,” is roughly three-and-a-half times where the level of current clean energy investment and will require the concerted engagement of the world’s largest investors. The biggest investors – pension funds, sovereign wealth funds, insurance companies – control roughly $76 trillion in assets. Estimates show those investors are committing less than 2% of the funds under their control to clean energy infrastructure, compared to the 10% to 15% going into fossil fuels.

Global investment in clean energy around the world slumped last year, the second year of decline since investment peaked at $317.9 billion in 2011. The main reason for last year’s decline was investor concern over policies that support renewable energy in its longest-established markets: Europe and the US. While this is a troubling trend for renewables, upon a closer inspection at the industry, the picture becomes more optimistic. The cost of renewables costs is falling, meaning clean-energy companies can do more with less capital and investors can earn more on their money. In the past 18 months, the cost of a typical solar panel system dropped by 45 percent and from 2012 through 2013, the total number of installed solar systems worldwide grew 20 percent. In other words, the volume of renewables on the grid is growing even though they are receiving less investment.

In 2013, Canada invested $4.2 billion in clean energy, down 23% from the year before. Over half of the total, $2.6 billion, was invested in carbon capture and sequestration demonstration projects in Alberta. The other eye-catching development in clean energy finance was a 150MW wind farm, also in Alberta, for $373 million.